To pay off your car is no easy task. Considering most Americans have a car loan their entire life, paying a car off early and never making a payment again is an unusual personal finance feat.

See the picture above? That is my amazing 2004 Acura TL. It was my dream car during college and I vowed to own one after I graduated. I made myself a deal. I told myself that if I graduated college debt free, I would go against one of my main principles: to never have debt. Yes, I promised to go into debt for a depreciating object! It sounds so silly, but there is just something really cool about this car. Let me tell you, it was worth every penny 🙂

So, I ended up graduating college debt free and purchased the Acura TL you see in the picture above. I hunted, scoured craig’s list, checked autotrader, and did ALOT of praying. I ended up finding the one I bought. The total cost of the car with taxes came out to roughly $15,000. My cash flow was tight at the time, so I ended up paying $5k up front and taking out a 5 year loan for the other $10k. At 3.99% interest, I didn’t hesitate to take this loan out. It’s funny because I was actually qualified for $50k. I remember the credit union clerk asking me why I didn’t want to spend more haha.

Anyways, so there I was, a proud owner of a 5 year loan. The excitement about the new car lasted for a while, but the gut wrenching thought of owing a bank money quickly took over. I knew I had to do something about it. I needed to pay this car loan off pronto. So what kind of steps does it take to pay off your car? Well, I’m glad you asked!

It was just after I purchased the car that I made a plan to pay off the car in less than 12 months. I moved away from home, set up a budget and made it a goal to save $1000/month strictly for paying off my car. If I did that, I could easily get it payed off before my goal of 12 months. Saving $1000/month would mean I would be able to pay off the car after 10 months. How did I do it in 8 months?! Two words: TAX REFUND.

Yes, my tax refund of $7k (thank you tution credits) made it possible to pay my car off in 8 months. My point is this. Don’t squander your tax refund. Whether it’s $1000 or $12,000, use your tax refund responsibly and pay down debt. Just make it a priority. If you do, you will savor the new debt-free air and never turn back. Let me tell you, it’s an amazing feeling. I love telling people that I own my car and the story about how I paid it off so early.

Another strategy I incorporated to pay my car off early was to schedule “extreme saving” weeks. By this, I mean that I made an extra effort to reduce my expenses to almost zero. This would mean brown bagging my lunch, raiding old food for breakfast and dinner, refusing to drive places on weekends, avoiding the grocery store, and other unusual saving activities. Through the use of extreme saving weeks, I could easily save a couple hundred extra dollars for that individual week. Keep an eye out, I’ll be writing a post on this subject in the near future…

I also shopped around for car insurance. I ended up going with a local car insurance company in the Seattle area. You need to make a strong effort to search out cheap car insurance quotes before you make any final decision.

So, get to it! Here’s the deal, you need to make a plan. You might not pay off your car 52 months early like I did, but you will be taking one step closer to “debt free driving.” After you pay off your car, you can contribute even more to your retirement accounts like 401k plans or a Roth-IRA.

This post was written by yours truly, Jon Elder. My mission is to help you succeed in your personal finance life. Join me on the journey to financial freedom! You can subscribe through RSS FEEDor EMAIL updates. You can also find me on TWITTER
and FACEBOOK
. Happy investing 🙂

This post was written by yours truly, Jon Elder. My mission is to help you succeed in your personal finance life. Join me on the journey to financial freedom! You can subscribe through RSS FEEDor EMAIL updates. You can also find me on TWITTER
and FACEBOOK
. Happy investing 🙂